Issue #1124 Business

Issue no: 1124/167

• FEBRUARY 12 - 14, 2019

• PUBLISHED TWICE WEEKLY

FOCUS

PRICE: GEL 2.50

In this week’s issue...

ON URBAN PLANNING

Activism is on the rise as Tbilisi's residents fight for the right to green spaces

PAGE 7

Weekly Entrepreneurial News @entrepreneur.ge NEWS PAGE 2

First Predictions: Georgia’s Real GDP Expected to Grow by 4.4% in 2019 ISET PAGE 4

Tbilisi to Host 3rd Annual B2B Luxury & MICE Workshop

Tbilisi City Hall Moves to Initiate ‘Khrushchovka’ Replacement Project

BY SAMANTHA GUTHRIE

D

uring a government meeting late last week, Tbilisi Mayor Kakha Kaladze renewed discussions on the project to give the city’s architectural façade a face lift. In July, City Hall completed the Tbilisi Land Use Master Plan. The plan includes the realization of one of Kaladze’s campaign promises – to replace the city’s khrushchovka apartment blocks.

Continued on page 5 Image source: allnews.ge

BUSINESS PAGE 3

Georgian Public Sector Introduces Performance Appraisal of Civil Servants BUSINESS PAGE 8

Renovated Cement Factory Opens in Kaspi BUSINESS PAGE 10

President Visits Georgian Peacekeepers in Afghanistan POLITICS PAGE 11 Prepared for Georgia Today Business by

Markets As of 08ͲFebͲ2019

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Bank of Georgia (BGEO LN)

GBP 15.85

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GEOROG 04/21

101.73 (YTM 5.90%)

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+0,9%

Georgia Capital (CGEO LN)

STOCKS

GBP 11.14

+1,3%

+9,7%

GEORG 04/21

106.07 (YTM 3.92%)

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+0,6%

GHG (GHG LN) TBC Bank Group (TBCG LN)

COMMODITIES Crude Oil, Brent (US$/bbl) Gold Spot (US$/OZ)

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+1,7%

GBP 14.08

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GEBGG 07/23

98.94 (YTM 6.27%)

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62,10

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2,6444

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1 314,29

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+2,2%

GEL / EUR

2,9947

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GEL / GBP

3,4200

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2,6369

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0,0974

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165,02

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0,8832

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0,7726

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SP 500

2 707,88

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1,0005

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MSCI FM

2 684,75

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65,4397

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GT Index (GEL)

1 582,68

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NEWS

@entrepreneur.ge Gamarjoba! I’m the Editor-in-Chief of the Georgian edition of Entrepreneur magazine and I’m here to share the top weekly Entrepreneurial news with you: The Millennium Innovation Award platform, aiming to boost the interest and motivation of youths in Sciences, Technologies, Engineering and Innovations, launched a project for those wishing to develop their ideas and introduce them to a wider audience and for professionals of different fields looking for new and interesting collaborations. The program is financially supported by the US Embassy.

Various projects have already been carried out and received positive expert evaluations. The authors of the most successful projects will travel to the USA and participate in an education program at the NASA Space Center University.

An innovative perspective, an image captured in a diverse manner and a reality reflected in 360 degrees: these are the outstanding features of photo-video studio ‘Watermark’, a Georgian startup.

Watermark founder Oto Shamugia says that at the development stage, he only had experience working in graphic design, and attributes his enthusiasm and interest as major factors leading to the company’s success. Watermark offers a fast and cheap service using the latest technologies to create interactive images. Watermark products have sold in more than 40 countries so far.

Kona is another Georgian brand expanding into international markets. After being introduced to tea lovers in The Netherlands and Lithuania, this Georgian premium-class tea can now be found on the shelves of ‘Mariage Freres’, a 200-year-old French tea house. Kona founder Natalia Partskhaladze says green and black tea are exported to France and six different Kona teas to the German market. The company plans to triple production by year-end. For Women’s Day in March, they will release a special selection of teas packed in handmade purses.

Follow the Entrepreneur Georgia Instagram page to get the latest updates from Georgian Entrepreneurs. For doing business with Georgian Entrepreneurs, write us on business@entrepreneur.ge

GEORGIA TODAY

FEBRUARY 12 - 14, 2019

Multi-Modal Reset Terminal Opens in Georgia’s Batumi

BY THEA MORRISON

A

multi-modal reset terminal was opened on the territory of the International Container Terminal located in Georgia’s Black Sea coastal city of Batumi, Ajara region.

The Batumi International Container Terminal LLC, together with Medlog Georgia LLC, provides storage infrastructure on a 2 ha plot of land and 3000m2 modern indoor customs warehouse.

The Batumi International Container Terminal LLC is now capable of receiving FEEDERMAX type container vessels with 11m drawing capacity, which greatly increases the operational capabilities and provides competitiveness of service, leading to a positive impact not only on the container terminal but on the port itself.

Tornike Rijvadze, the Chairman of Ajara Government, together with Giorgi Kobulia, the Minister of Economy and Sustainable Development of Georgia, opened the multi-modal reset terminal.

The ceremony was also attended by the Director of the LEPL Maritime Transport Agency the Ministry of Economy and Sustainable Development of Georgia, Tamar Ioseliani, MSC Georgia Managing Director Alkan Alicik, Commercial Director of MEDLOG Turkey Volkan Tek, partner of MSC Georgia and MEDLOG Georgia Jemal Inaishvili, MEDLOG (Geneva) Executive Director Salvatore Prudente, Vice President of the ICTSI (Europe, Middle East and Africa) Hans Ole Madsen and the Batumi International Container Terminal LLC Acting Director, Nikoloz Gogoli.

The guests examined the new terminal,

Image source: Government of Ajara

where dredging works in the equatorial and channel waters have been successfully completed.

Kobulia highlighted the importance of the project, adding it will definitely contribute to the increase of Georgia’s transit potential.

The Minister further claims that the project will help exporting companies to have better access to the international markets. He added the terminal project is implemented in compliance with the highest standards by the international company ICTSI and its subsidiary.

“This will be the one of the leading projects, covering not only warehousing, but also provision of communications, railway and road access to the port as well as expansion of the port. This will

enable us to increase the terminal capacity by 100% - increasing it from 100,000 to 200,000 tons. It is a very important project that will further develop not only Ajara but Georgia’s whole economy,” the Minister stated at the opening ceremony.

Rijvadze spoke about the importance and strategic role of Batumi Sea Port.

According to him, the multi-modal terminal will help to double cargo turnover at Batumi sea port, so enabling local economy development and creating new jobs for local citizens.

“Our priority is to turn our country into a regional hub for logistics and transport. New, modernized infrastructure is important to achieve this goal,” the Chairman of the Government of Ajara said.

BUSINESS

GEORGIA TODAY FEBRUARY 12 - 14, 2019

Tbilisi to Host 3rd Annual B2B Luxury & MICE Workshop

O

n February 13, Tbilisi will for the 3rd year host the prestigious professional luxury travel event B2B Luxury & MICE Workshop, which will be held this year at Rooms Hotel in Tbilisi.

As an established specialist travel industry event, the B2B Luxury & MICE Workshop brings together a variety of luxury hospitality and destination travel products in Georgia, Azerbaijan and Kazakhstan, and introduces them to new markets where travel and specifically Luxury travel is emerging.

B2B is a closed ‘invitation only event’ focused on luxury and up-market travel products including luxury hotels and resorts, destination management companies and travel destinations such as national and regional tourism boards. A selected number of leading outbound Georgian Travel companies have been invited to attend the workshop and evening cocktail party. The Workshop will allow local Georgian travel companies to have one-to-one meetings with prestigious international exhibitors.

The B2B Luxury & MICE Workshop is organized by the British company TMI, a travel marketing and communication company which is part of Travel Consul alliance (www.travelconsul.com), working in partnership with Brandor Consulting, Georgia.

This year, B2B Luxury & MICE Workshop brings a number of prestigious new destinations to the Georgian market for the first time, including the tourism boards of Catalunya and Tenerife, as well as the national tourism boards of Spain and Slovenia, who are taking part in the event again. There

are also some new hospitality participants including international hospitality brands such as the Intercontinental - Vienna Hotel from Austria and the historical Hotel Metropol, in Moscow. S7, Russia’s 2nd largest airline, will also take part in the event for the first time, as will Turkish Airlines.

There will also be a number of hotel and DMC representatives from Slovenia and Croatia.

Helene Lloyd, the international coordinator for B2B Luxury & MICE Workshop, said: “Returning to Georgia is like coming home. We see both the outbound and inbound travel markets expanding and are very excited at the prospects for this market. Georgia is great as it nearly always exceeds all expectations that our clients have prior to visiting the country and although they mainly come here for business, many of them later take the opportunity to come back and visit the country with their families on a personal level.

Lloyd went on to announce some exciting news: “Due to our great partnership with our local Georgian partners, Brandor Consulting and the Georgian travel industry in general, we have decided to launch an Autumn version of B2B Luxury & MICE in midOctober, 2019. For the Autumn addition, we aim to bring all our international clients, as well as international buyers, from Kazakhstan, Azerbaijan and Russia to meet each other in Georgia”.

A complete list of foreign participants and the event details can be found on the event website www.B2Btravelworkshop.com or on the Facebook page.

UNICEF: One in Five Children in World Lives in Extreme Poverty

Photo source: UNICEF

BY THEA MORRISON

U

NICEF and ILO (International Labor Organization) joint report, released on February 6, reads that one in five children lives in extreme poverty (less than $ 1.90 a day), and almost half of the world’s children live in ‘moderate’ poverty (under $3.10 a day).

Isabel Ortiz, Director of Social Protection, ILO, said that child poverty can be reduced overnight with adequate social protection.

“To improve the lives of all children is an issue of priorities and political will: even the poorest

countries have fiscal space to extend social protection floors,” she stressed.

Alexandra Yuster, UNICEF Associate Director and Chief of Social Policy, noted that poverty hits children the hardest since its consequences can last a lifetime.

“The poor nutrition and lost years of education that often result are tragic both for the individual and for his or her community and society,” he said.

The report calls for the rapid expansion of child and family benefits, with the aim of achieving universal social protection for children, as well as the Sustainable Development Goals.

It also reads that social protection is critical in helping children escape poverty and its devastating effects, adding the vast majority of children have no effective social protection coverage.

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BUSINESS

GEORGIA TODAY

FEBRUARY 12 - 14, 2019

First Predictions: Georgia’s Real GDP Expected to Grow by 4.4% in 2019 This change is resultant on two factors: firstly, Geostat’s newly released growth figures for the fourth quarter of 2018 was 1.1 percentage point higher than ISETPI’s most recent forecast. Secondly, rapidly increasing national currency deposits, continuing monetary growth, and a notably improved trade balance have all contributed to buoyant expectations.

RAPIDLY INCREASING NATIONAL CURRENCY DEPOSITS

BY DAVIT KESHELAVA AND YASYA BABYCH

I

SET-PI has updated its forecast of Georgia’s real GDP growth rate for the first and second quarters of 2019. These are the main features of this month’s release: • Geostat has published its rapid estimate of real GDP growth for the fourth quarter of 2018, and their estimated growth stands at 4.8%, which is 1.1 per-

centage point above ISET-PI’s most recent forecast.

• Utilizing the latest data, real annual GDP growth in 2018 amounted to 4.8%.

It is notable that by March of 2018, our model predicted 4.8% real growth in the “middle-of-the-road” scenario that now perfectly coincides with the official statistics. Moreover, our annual GDP forecasts of 4.7% (since November) and 4.6% (since December), equally were revealed to be quite accurate.

• ISET-PI’s forecast for the first quarter of 2019 now stands at 4.1% - up from 3.1%

in January. The second quarter growth forecast currently stands at 4.2%.

• Based on the data from December, we expect annual growth in 2019 to be 4.1% in the worst-case scenario, and 5.2% in the best-case or an average long-term growth scenario. Our middle-of-the-road scenario (based on the average growth in the last four quarters) predicts a 4.4% increase in real GDP. Expected growth in Q1 2019 has risen, and ISET-PI’s forecast for real GDP growth for the first quarter of 2019 was upwardly revised by 1.0 percentage point.

The first set of variables with a significant positive effect on our forecast relate to national and foreign currency deposits in commercial banks. In December, all national currency deposits experienced double-digit growth in annual terms. In particular, the national currency demand deposits saw an annual increase of 28%. Additionally, the national currency time deposits increased by 27.5% annually. The main contributors to this growth were national currency deposits with a maturity of less than 1 month (19.9 pp.) and national currency deposits with a maturity greater than 12 months (8.8 pp.). Consequently, national currency total deposits increased by 23% yearly.

It worth mentioning that in just December the Georgian government placed 550 million national currency deposits with a maturity of 1 month in domestic commercial banks.

In contrast to domestic currency deposits, foreign currency total deposits increased relatively moderately by 10.5% compared to the same month of the previous year. Furthermore, foreign currency demand and time deposits increased by 19.2% and 11.5% yearly, respectively.

Deposit dollarization was reduced to 63.1, compared to 65.6 in the same period of the previous year. According to our model, the trends in national and foreign

deposits have had a significant positive contribution to real GDP growth.

CONTINUING MONETARY GROWTH Monetary aggregates are another set of variables that have had a significant positive effect on our forecast. As of December, the monetary policy committee of the National bank of Georgia (NBG) decided to leave its monetary policy rate (MPR) unchanged. NBG follows a slow normalization process in its monetary policy, as the risks remain in the external sector, which could potentially have a negative impact on Georgian inflation. However, all of the monetary aggregates experienced reveal notable yearly increases, including currency in circulation (4.1% monthly and 7.8% yearly) and broad money (M3) (6.7% monthly and 14.7% yearly).

NOTABLY IMPROVED TRADE BALANCE The final variables which have had a substantial positive effect on the predicted real GDP growth are related to the external sector. Georgian exports continued to expand, increasing by 14% yearly in December 2018, while imports shrunk by 2.7% yearly. As a result, the trade deficit declined by 11.4% yearly to 488.1 million USD. Furthermore, the re-export of automobiles, the exports of cooper ores and concentrates, and Ferro-alloys were the main contributors to the growth in export.

While other external variables, such as remittances (9.1% increase), the number of international visitors (0.2% increase) and tourism (11.6% increase), maintained their growth trends in December. Our model reveals that external sector variables have had a positive contribution on real GDP growth projections.

Our forecasting model is based on the Leading Economic Indicator (LEI) methodology developed by the New Economic School, Moscow, Russia. We constructed a dynamic model of the Georgian economy, which assumes that all economic variables, including GDP itself, are driven by a small number of factors that can be extracted from the data well before the GDP growth estimates are published. For each quarter, ISET-PI produces five consecutive monthly forecasts (or “vintages”), which increase in precision as time goes on.

Our first forecast (the 1st vintage) is available about five months before the end of the quarter in question. The last forecast (the 5th vintage) is published in the first month of the next quarter.

BUSINESS

GEORGIA TODAY FEBRUARY 12 - 14, 2019

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Tbilisi City Hall Moves to Initiate ‘Khrushchovka’ Replacement Project Continued from page 1 Khrushchovka is a term used for a type of Soviet-built apartment building, typically a low-cost, concrete-paneled (or sometimes brick), generally five-story building, constructed during the government of Soviet Premier Nikita Khrushchov in the mid-1950s and early 1960s.

During his election campaign, nowMayor of Tbilisi, Kakha Kaladze, promised to gradually tear down and replace the approximately 700 khrushchovka buildings throughout the city, calling them “ugly and dangerous to live in.”

The buildings, found all across the former Soviet Union, were originally built with a 25-year life span in mind, but most are now approaching 60 years of use.

They were built quickly and simply, designed to be functional, cheap, and to fit in as many families as possible as a response to the post-WWII housing crisis faced by the Soviet Union as waves of migration brought more people to urban areas. In fact, khrushchovkas were praised at the time as an innovative solution to a severe problem. In 1967, an official from the US’ National Bureau of Standards was quoted in the Chicago Tribune as saying, “What the Russians have done is to develop the only technology in the world to produce acceptable, low-cost housing on a large scale.”

Last week, Kaladze said that “interest” had been “expressed on the development of a new district on three hectares of municipal property in Varketili. This is a project under which the replacement of khrushchovkas in Varketili should be carried out.”

The debate over khrushovka apartments

is well known in Georgia – they have clear disadvantages, but also several selling points. People are turned off by their nonmodernity. The lack of open floor plans, low ceilings, and small kitchens and bathrooms conjure distinctly Soviet memories.

Poor insulation, uneven floors, cracked walls, dilapidated stairwells, and no elevators pose more practical concerns.

Often, repairs to the building have been done in a semi-professional patchwork over time, causing safety concerns. For those who don’t live in a khrushchovka, they are impossible to miss. The discolored grey concrete and graffiti covered walls of most buildings are an eyesore, particularly compared to Tbilisi’s elegant and delicate pre-Soviet architecture or even some of the more recent sleek glass or colorful plastic creations.

Many, however, sing the praises of khrushchovka living. The buildings provide a quality of family life that is hard to beat with their large, communityfocused courtyards, mature trees, and wide walkways between buildings. Many owners have invested significant time and money renovating their apartments and are resistant to the idea of being resettled. Generations of a family have often lived in the same apartment, embedded with memories and history, relationships with neighbors, and affection for the neighborhood.

There are also concerns over new developments, built sloppily by developers in an attempt to make a quick profit, many older buildings are regarded as more desirable than new constructions in terms of building quality.

The plan is to construct 75,000 m2 of apartments in the three-hectare space

in Tbilisi’s Varketili neighborhood. City Hall in now soliciting proposals from construction companies to take on the project. At the end of May last year, Kaladze spoke to the press about his plan for the massive replacement project, saying that “The first stage of replacements is planned for four blocks of khrushchovka apartments in the 6th and 8th quarters of the III Massive in the Varketili District” – in the east of the city, near the airport. Currently, 170 families live in these buildings, and Kaladze vowed they would be given new “modern and European style” apartments, the same size as or larger than their current homes. “This is not a one-time project,” said Kaladze, “the process is ongo-

ing and it will give us the chance to implement the large-scale so-called khrushchovka project and I am very glad that this project has started.” During his election campaign, Kaladze assured voters that that displaced khrushchovka owners would be able to choose between financial compensation or a new apartment.

An article published last week by Caucasus Business Week (CBW) shared data from Gvantsa Gujelashvili, the owner of myclient.ge, an online Georgian real estate agency. Gujelashvili estimates that there are currently more than 500 khrushchovka buildings in the city, mostly in the neighborhoods of Dighomi, Varketili and Saburtalo – particularly near Vazha-

Pshavela Ave. “There is no demand for these types of flats,” CBW quotes Gujelashvili, “The level of people’s demand has already changed and they prefer to purchase [an apartment in a] building with better infrastructure instead of [in an old building, with] old sewage and communication systems.”

Myclient.ge says the average price per square meter for a khrushchovka apartment is generally a fraction of the price of other types of construction. For one khrushchovka square meter in Saburtalo and Didube, apartments are priced in the mid- $600s, while in Varketili, Temka, Samgori and Gldanula, a square meter goes for $450-475, on average.

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BUSINESS

GEORGIA TODAY

FEBRUARY 12 - 14, 2019

In Big Men Georgians Trust!

BY DAVID APRASIDZE

W

hile we don’t trust each other and people who are supposed to represent us (political parties and NGOs are the least trusted Georgian institutions!), we do seem to believe in strong authority embodied in Georgia’s Big Men, our Church, the military and police. And, as long as we fail to get our act together, we will have no choice but continue to expect favors from the next Big Man, hoping that he will be a little bit better than his predecessor (or at least less crazy).

ing to Georgia Today.

Georgia’s ranking in Freedom House Index since 1995 (see chart) reveals an interesting regularity: • From the moment Georgia adopted its first constitution and started looking like a state, its democracy score has fluctuated within the margins set for “partly free” nations (between 2.5 and 5.0 on a 1-7 scale, with 1 representing the ideal of democracy and civil liberties).

• Georgia’s score improved to 3 in periods in which the ruling parties were consolidating their power. We refer to these episodes as periods of democratic opening.

• Conversely, Georgia’s score went a notch down, to 4, when the ruling par-

degrees of political competition. Some democracies have been for very long stretches of their history ruled by a single party (Japan’s Liberal Democratic Party, Israel’s MAPAI). Others have had periods of too much political competition, resulting in very frequent elections and government changes. The French Fourth Republic (1946-1958) is a classic example of the latter: during its 12-year history it was ruled by 21 different administrations.

GEORGIA’S BIG MEN AND DEMOCRACY * * * Zurab Zhvania, a founding father of modern Georgia and a prominent leader of the first generation of Georgian reformers, was once asked whether Georgia had any assets it could rely on.

“Our democracy,” was Zhvania’s instinctive response. By the same token, the politician and public figure Levan Berdzenishvili later joked that God endowed Azerbaijanis with oil, Armenians with a large and influential Diaspora, whereas Georgians have nothing but their democracy.

While Georgians have a lot of appreciation for civic freedoms and democracy, their governance is not particularly democratic. Georgia seems to be forever “lurching towards democracy”, to rephrase the title of a late 1990s book.

Our situation reminds me of Diaspora Jews who for 2000 years have been praying for the “Next year in Jerusalem”.

“Next year in (democratic) Europe” may have acquired a very similar semireligious meaning in Georgia’s contemporary political discourse: a lofty but elusive ideal.

An annual ranking is based on data from the previous year, i.e. the 2019 ranking is based on 2018 data.

Indeed, since acquiring independence in the early 1990s, Georgia has not been able to escape the twilight zone between democracy and autocracy. According to the most recent assessment by Freedom House, Georgia is classified “partlyfree”, having lost only one point (on a scale of 100) compared to the previous year. Similarly, Georgia is considered a “hybrid regime” (between “flawed democracy” and “authoritarian regime”) by the Economic Intelligence Unit (EIU) of The Economist. In 2018, Georgia’s score in EIU’s Democracy Index dropped from 5.93 to 5.5 (on a 10-point scale), the steepest decline in the region, accord-

ties were desperately trying to hold on to power in the face of mounting opposition. Two such downturns (or democratic closures in our terminology) coincided with the second terms of Messrs. Shevardnadze (2000-2003) and Saakashvili (2008-2012). The first signs of another downturn have become visible since Mr. Ivanishvili official return to power in 2018.

These ups and downs remind us that after 25 year of independence we still have a long way to go as far as our democratic governance is concerned.

An even bigger question for the vast majority of Georgians is whether the country’s democratic advancement can bring tangible improvements in the lives of ordinary citizens. In the end, as a popular joke of the first years after the Rose Revolution goes, – “can we eat democracy?”

Where is Georgia’s place between these two extremes of too much vs. too little competition?

Whenever we analyze Georgia’s democracy, we tend to focus on excessive concentration of political power in Tbilisi. But, let us not forget that politics (democratic or not) originate at the grassroots, in Georgia’s ordinary settlements – villages and small municipalities. And what we find at the grassroots of Georgia’s politics is not public debate or competition, but The Big Man („დიდი კაცი“ in Georgian).

The Big Man takes care of all issues faced by local businesses and fellow citizens; He (very seldom a “she”) is also the first person anyone outside will

try to approach when dealing with the community. Salience in local politics and a strong clientele base make The Big Man an attractive target for national actors who would gladly co-opt Him with little regard for shared values or political vision.

Of course, The Georgian Big Man has many rivals and challengers, as all big men do. Lacking in authority and resources, his rivals are waiting for an opportunity to challenge and replace Him. However, they do not seek to challenge and change the system.

The Georgian Big Man phenomenon is apparently rooted in the chronic failure of collective action at the level of Georgia’s local communities. More than 50% of Georgian respondents in CRRC’s 2017 Caucasus Barometer survey claimed to have no or little trust in fellow citizens, as opposed to less than 20% who reported some or full trust. Statistics aside, we are reminded of our failure to cooperate and contribute to a common pool of resources every time we enter our dirty and poorly lighted blocks of flats and have to drop a 10 tetri coin in the elevator’s slot machine.

While we don’t trust each other and people who are supposed to represent us (political parties and NGOs are the least trusted Georgian institutions!), we

do seem to believe in strong authority embodied in Georgia’s Big Men, our church, the military and police. And as long as we fail to get our act together and cooperate, we will have no choice but to continue to expect favors from the next Big Man, hoping that he will be a little bit better than his predecessor (or at least less crazy). * * * A key challenge of Georgia’s “partly free” politics is the fact that there are “Big Men” everywhere – in villages and small communities, businesses and NGOs, schools, universities, political parties, and so on and so forth, all the way up. However, the “partly free” Georgian nation is not fated to be dominated by crazy-and-brutal or wise-and-goodhearted Big Men. It is time for us to get organized and collectively design better laws and institutions that govern our life: elections and party financing, taxes and trade, industry, agriculture, education, and everything else.

Next year in Jerusalem!

ABOUT THE AUTHOR: David Aprasidze is a political scientist working on political transformation and democratization issues. He is a professor at Ilia State University and a senior associate with Tbilinomics.

Chart 2: Trust in Institutions

BAKERS AND POLITICIANS When it comes to professionalism, Georgians love to recite the 18th century poet David Guramishvili whose famous “bread must be baked by the baker” is invoked whenever we are not happy with the quality of services or goods we are offered.

But, as we know from basic economic theory, to produce good bread (and sell it at a reasonable price), bakers must operate in a competitive environment.

And what is true for bakers is equally true for politicians. A lack of perceived competition is likely to make even the greatest among them insensitive to popular demands or new ideas. Whether she said so or not, Marie Antoinette’s “let them eat cake” can serve as an illustration of such extreme insensitivity.

Democracy’s key virtues, at least in theory, are public debate and competition, but nations can be democratic in form while maintaining very different

Georgia 2018, Nationwide Public Opinion Survey on Georgians' Attitudes towards Civil Society Organizations, Corporate Social Responsibility, and European Integration, https://caucasusbarometer.org/en/ks2017ge/codebook/

BUSINESS

GEORGIA TODAY FEBRUARY 12 - 14, 2019

7

Georgian Government Ends Funding for Anaklia Music Festival

BY SAMANTHA GUTHRIE

T

he Georgian government has been financing a summer electronic music festival in Anaklia for the past three years, spending more than 10 million GEL ($3.78 mln). 2019 will end the tradition.

The Georgian Electronic Music Festival – GEM Fest – ran from 2015-2017 (the first year without state funding). It was one of the first major electronic music festivals in the Caucasus regions, drawing big name artists and partiers from all over the world. In 2017, the festival proclaimed it was the longest electronic music event in the world at 32 days. A fourth iteration of the festival was scheduled for 2018, but was canceled just weeks before due to a loss of government support. The Ministry of Economy and Sustainable Development rejected the organizer’s application to rent a plot in Anaklia and decided to provide financial backing to another electronic music fes-

tival, EchoWaves Anaklia, instead.

Reasons for the government withdrawing their support were never explicitly revealed, but it was likely related to the festival’s increasing association with club drugs, especially the popular and deadly “Bio” (Gamma-Hydroxybutyrate – GHB), which killed a 22-year-old Georgian woman in 2017. The festival was also plagued with allegations of financial violations and was investigated by the Ministry of Finance after some 300 festival employees claimed they had not been paid. Festival organizer and founder Giorgi Sigua denied allegations of embezzlement and promised that all the employees would receive their salaries.

After announcing its cancellation, the official statement from GEM Fest was angry, saying “Is it fair to treat a project which put Anaklia on the world’s Festival map like this? Let history and society judge. We got what we got: the land where the festival took place will not be hosting us this summer.”

In October 2017, then-Minister of Economy of Georgia Giorgi Gakharia raised concerns over government participation

Image: GEM Fest

in the festival, saying he thought it would be a “bad idea” to continue financing it.

“Tourism support will continue in 2018 [through the Check in Georgia program], but my position is that the electronic music festival GEM Fest should not be state-funded again,” Gakharia said,

emphasizing the importance of letting the private sector step in where it can, strengthening the Georgian economy.

In 2018, EchoWaves took GEM Fest’s place as Georgia’s major music festival.

The Georgian National Tourism Administration, a branch of the Ministry of

Economy and Sustainable Development, allocated 4.1 million GEL ($1.55 mln) to the festival as part of the Check-in Georgia program – nearly 70% of the festival’s costs. Up to 40,000 guests from 35 countries attended the festival, which was deemed a success.

Last week Minister of Economy Giorgi Kobulia told Business Media Georgia “We have already made the decision not to fund a [summer electronic music] festival. However, if anybody is interested in holding [an electronic music] festival, the government will provide infrastructure and healthcare support.”

EchoWaves is currently still on the docket for 2019. Organizers have not yet publicly responded to the government’s decision not to provide financing.

The first festival to break ground in the usually sleepy coastal town of Anaklia was the semi-legendary Kazantip, held there in 2014 after 22 years in Crimea, Ukraine. Now, would-be festival-goers are waiting eagerly to see whether a private sector company will step up and fund an electronic music festival on the Black Sea coast this summer.

The Rise of Urban Activism in Tbilisi

BY AMY JONES

O

n February 9, urban activists held a protest against the construction of apartment buildings on one of the last remaining green areas on the edge of Saburtalo district in Tbilisi. The protest is one of many recent protests marking the growing influence of activists against the urbanization of Tbilisi’s green areas.

The developer, Optima, also known as m², intends to build a residential complex on a 19.6 thousand square meter plot on Shavishvili Street, close to the Tbilisi State University high-rise building. The development will consist of four 12-storey apartment buildings as well as a kindergarten, sports stadium, and a playground.

Optima claims that 50% of the space will be dedicated to green area, with only 20% used for the development. “The development is permitted to use 50% of the land, but m² intends to only use 20% of the total area,” reads a statement on their website.

However, urban and green activists claim that the development breaches existing regulations. The area of land on which the development is planned has been listed as a “recreational” zone since 2008 as part of the Regular Spatial Plan

Image source: My City is Killing Me Facebook Page

(RSP). Representatives from Optima dispute this, claiming Tbilisi City Council modified the planning regulations in 2009 but that the changes have not yet been reflected in zoning maps.

Another point of contention is the possibility that the construction area may have been used as a cemetery for WWII

Prisoners of War (PoW) during the 1940s and 50s. Irakli Khvadagiani, a researcher from the Soviet Past Research Laboratory has said that topographic and aerial maps from the period as well as statements from people alive at the time suggests that the cemetery was there.

Although they have not carried out

definite research, preliminary results lead them to believe that PoWs worked in a brickwork factory in the area. Activists want further research to be conducted to ensure that the PoWs are properly remembered.

The protest on 9 February comes a few weeks after officials reversed the deci-

sion to allow the construction of Budapest Hotel in Vake Park. Activists criticised the hotel plans as it would destroy another green area in Tbilisi. During a meeting on January 25, Tbilisi Mayor Kakha Kaladze congratulated activists for protecting Tbilisi’s green spaces: “Vake Park has won. I would like to congratulate Tbilisi and the Tbilisians. We have managed to reach an agreement, and nothing will be built on the Vake Park territory.

The movement against uncontrolled urbanization has united left-wing activists, the green movement, those interested in history and other concerned citizens.

Various NGOs and student groups such as My City is Killing Me, Green Alternative, Guerrilla Gardening Tbilisi, Emc, Tiflis Hamkari, Initiative for Public Space, and My City - Union of Citizens Concerned and Caring for the City have been at the forefront of calls to stop urbanization. A few hundred people joined the protest held on 9 February which was organized by various groups.

Their concern lies in the lower quality of life in Tbilisi when green spaces and historical heritage are destroyed. Activists blame a poor vision of Tbilisi’s future as well as collusion between developers and city officials. Poor urban planning makes cities less habitable whilst also endangering life and the health of citizens for both the current generation and generations to come.

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BUSINESS

GEORGIA TODAY

FEBRUARY 12 - 14, 2019

Rooftop Skiing – Just What You Need When the Ground is Not Enough!

BY KETEVAN KVARATSKHELIYA

I

t’s difficult to imagine something truly innovative in rooftop design.

We can already enjoy cocktails and a breathtaking view from up high, and sunbathe beside an infinity pool over the city, sea or mountains. However, the new residential complex offered by the Dux Development Company in Bakuriani, Georgia, is set to beat your wildest imagination and shock both locals and visitors in the very best way.

The jaw-dropping project of Dux Development, called Landmark Bakuriani, is set to boast an incredible rooftop ski slope, the first of its kind in Georgia!

In the 21st century, security and comfort are of paramount importance. With the help of experienced and creative architects and partner companies, Dux Development guarantees maximum safety and a cozy atmosphere for the residents of Landmark Bakuriani.

Located just 600 meters from the Didveli piste, Landmark Bakuriani will be an ideal destination for mountain resort lovers. However, it is likely that our residents may even forget the existence of Didveli once they discover the treasure of Landmark Bakuriani: the 102meter secure ski zone!

The complex will allow residents to ski in the comfort of their own building, and you won’t have to be a Red Bull Extreme Rider to enjoy the rooftop ski zone, as it will be made suitable for all age groups and levels.

The complex will also feature a ski gym and two indoor ski slopes, making

the stay even more of a pleasure. In fact, it’s ideal for the whole family as the resort of Bakuriani is well known for amateur skiing and family holidays.

Landmark Bakuriani will be an excellent place to spend valuable time with your loved ones.

For maximum safety, Dux Development has entrusted the construction process of the ski slopes to one of the most experienced companies: SKIWORLD-PRO. Even though the rooftop is the most distinguished element of Landmark Bakuriani, it would be unfair not to point out some of its other wonderful features.

Take the hotel-type apartments, for example- coming in two categories (suites and junior suites) which will all come fully furnished, and that includes electrical appliances! A 5-star hotel service and 24/7 security with concierge will also be available. Landmark Bakuriani will also boast indoor and outdoor parking spaces for 30 and 100 vehicles, respectively.

The spacious lobby and bar will make the perfect space for family and friends to gather and will help make your stay all the more delightful. Parents will be able to keep an eye on their children skiing while enjoying a drink or two in the Skybar. A restaurant with delicious dishes will also be ready to serve in the complex.

The creators of Landmark Bakuriani had families very much in mind when they designed the complex. It is surrounded by a whopping 10 acres of woodland, incredible entertainment facilities, a magnificent adventure park and relaxation zones for children and their parents- all to guarantee you unfor-

gettable holidays. The outdoor space will be open to benefit all visitors to the resort.

The residential project was designed

by Georgian architect Sebo&Dito Studio and is set for completion in December 2020.

Landmark Bakuriani represents a won-

derful chance to spend your holidays in a pleasant atmosphere and enjoy the stunning nature of the Bakuriani mountain resort.

Georgian Public Sector Introduces Performance Appraisal of Civil Servants

P

erformance appraisal of civil servants as an important step in the implementation of the Public Administration Reform in Georgia was discussed at a conference on 8 February 2019, attended by 80 representatives of the Georgian ministries, Government Administration, National Bank of Georgia, civil society and international organizations. The invited experts and representatives of the public agencies presented the benefits and drawbacks of a performance appraisal system, introduced in January 2018.

The event was organized by the Civil Service Bureau of Georgia with the assistance of the United Nations Development Programme (UNDP) and UK aid from the UK Government.

Ekaterine Kardava, Head of the Civil Service Bureau of Georgia; Natia Zedginidze, Deputy Minister of Education, Science, Culture and Sports of Georgia; Gela Khanishvili, Deputy Minister of Environmental Protection and Agricul-

Photo: Vladimer Valishvili

ture of Georgia; and Gigi Bregadze, UNDP Democratic Governance Team Leader in Georgia, addressed the participants of the conference at an opening session.

Ekaterina Kardava stressed that the new system of performance appraisal gives civil servants more opportunities for career growth and professional development.

“The success of every public institution depends on the success of its employees. The new system of performance appraisal allows for assessing civil servants against the objective indicators, such as the achievement of goals, defined at the beginning of the year,” Head of the Civil Service Bureau of Georgia said.

UNDP’s Gigi Bregadze noted that the ongoing reforms in civil service are a step forward to ensuring good governance of public institutions.

“The establishment of a performance appraisal mechanism in civil service is a challenging process which requires systemic transformations in civil service

and changes in the attitudes of civil servants. Nevertheless, some major steps forward have been already made to establish an effective system to assess performance of civil servants,” he said.

The establishment of an objective and efficient performance appraisal system for civil servants is mandatory for all public agencies in Georgia under the Law on Civil Service. UNDP and UK aid from the UK Government have been supporting the introduction of this new mechanism since 2017 providing thirteen partner agencies with technical support and expertise. UNDP and UK aid helped organise a series of working meetings across the public agencies to develop specific appraisal procedures and relevant documents.

The establishment of performance appraisal system in civil service is part of the ongoing Public Administration Reform (PAR) in Georgia supported by UNDP and UK aid from the UK Government in partnership with the Georgian Government.

BUSINESS

GEORGIA TODAY FEBRUARY 12 - 14, 2019

9

Why is a Powerful Processor Important in Smartphones & What is the Advantage of HUAWEI

BY MARIAM MERABISHVILI

R

ecent successes have demonstrated that overcoming challenges and offering innovations to consumers has become HUAWEI’s distinctive calling card. HUAWEI's flagship models, created with high quality artificial intelligence, a powerful battery and unique charging function, continue to convince us that the company is the leader among smartphone manufacturers.

A few years ago, when HUAWEI entered the Georgian market, focus was put on budget models, in 2015-2016 on average price, and now the spotlight is well and truly on HUAWEI’s flagship models.

Compared to other brands, HUAWEI’s

superiority is proven through its highquality products, modern design and ideal combination of technical data and affordability.

In Georgia, as in other countries, smartphone users are divided by taste: for some the most important consideration is price; for some, brand and prestige; for others the technical characteristics are paramount.

HUAWEI uses its own Kirin processors in its smartphones, turning their phones into faster and more customeroriented devices.

The first flagship smartphone in the budget segment was the HUAWEI Honor 8 with a Kirin 950. Later, the first HUAWEI P10 and HUAWEI P10 plus appeared on the market – with a faster charging function which allowed the battery to work a whole day on a 30-minute charge thanks to the 8-core Hisilicon Kirin 960

processor made by HUAWEI. This was followed by the HUAWEI Mate10 Pro and HUAWEI Mate10, with artificial intelligence based on the Kirin 970 processor, which ensured quick and uninterrupted operation of mobile functions and maximally saved the user's time and energy. That's why the powerful 4000 mm-amperes battery became one of the main features of the fastest smartphone which, with the Kirin 970

processor, works for two days in standard mode. The battery charges to 20% in just 10 minutes and up to 58% in only 30. The HUAWEI Mate10 Pro screen is equipped with an IP67 protection quality that ensures waterproofing for up to half an hour in water up to 1 meter in depth.

One of the key features of the HUAWEI P series smartphones HUAWEI P20 and HUAWEI P20 Pro is the Kirin 970 processor that provides the highest efficiency, speed and stability of the system.

"We are entering a new era of technology, one of the main features of which is artificial intelligence, which brings us completely new opportunities”.

The new Kirin 980 processor welcomes a new era of mobile technology and artificial intelligence development. The world's most powerful nanoprocessor, the Kirin 980's capacity exceeds that of its predecessor by 70%. Compared to the 10nm processor, the 7 nm processor brings 20% more efficiency and consumes 40% less energy. The HUAWEI Mate20 and HUAWEI Mate20 Pro are equipped with the Kirin 980, seeing the quality of smartphones improved at a lower energy consumption.

In 2017, HUAWEI showed the world the opportunities presented by the microprocessor Kirin 970. In 2018, the company offered users an upgraded processor Kirin 980, characterized by distinctive capabilities in correspondence to artificial intelligence and innovative capabilities in general, which astonished HUAWEI loyal consumers.

HUAWEI products and services are available in more than 170 countries and are used by a third of the world's population. There are 16 research and development centers operating worldwide in the USA, Germany, Sweden, Russia, India and China. HUAWEI Consumer BG is

one of HUAWEI's three business units, mainly focusing on Smartphones, personal computers, tablets and cloud services. HUAWEI Global Network is based on 20 years’ experience in the telecommunications business and serves to provide innovative technologies to customers around the world.

10

BUSINESS

GEORGIA TODAY

FEBRUARY 12 - 14, 2019

Renovated Cement Factory Opens in Kaspi

Image source: gov.ge

BY THEA MORRISON

A

renovated cement factory was opened in the town of Kaspi, central Georgia, on February 8.

The ceremony was attended by the Prime Minister of Georgia, Mamuka Bakhtadze, German Ambassador to Georgia Hubert Knirsch, Heidelberg Group's Chairman of the Managing Board Dr. Bernd Scheifele, Head of Northern, Eastern Europe and Central Asia Group Area Dr. Albert Scheuer, HeidelbergCement Georgia's General Director Michael Hampel, the Georgian CoInvestment Fund's CEO Giorgi Bachiashvili, and Honeywell Partners' Director Irakli Rukhadze.

HeidelbergCement Georgia reports that they have carried out the full modernization of the Kaspi Cement Plant to open a new clinker production line.

Preparatory works for the plant's modernization project were launched in September 2016, with a $100 million investment in the project.

The project was implemented with support from the Georgian Co-Investment Fund and Honeywell Partners.

As reported, the project involved building a dry processes manufacturing line that significantly cuts production costs and ensures a higher output. Within the project, a high-standard filtration system and special equipment for continuous emission control were installed to allow for online monitoring of the plant's dust and emission volumes.

The Georgian Prime Minister stated that the plant is yet another message from international investors confirming that doing business in Georgia is safe.

He pointed out that the project will significantly encourage Georgia's economy.

“Kaspi has great cement manufacturing traditions, and I am happy that we are opening this modern line of production. Cement manufacturing has always been a traditional industry in Georgia, and we need new technologies to further the sector's competitiveness,” he noted.

Bakhtadze said the factory is the best not only in Georgia, but in the whole region.

“I would like to wish luck to this factory and every person employed here,” the PM stated and thanked the Georgian Co-Investment Fund, Honeywell Partners and HeiderbergCement Georgia for their investments.

HeidelbergCement is one of the world’s largest building materials companies. With the takeover of the Italian cement producer Italcementi, HeidelbergCement became the number one in aggregates production, number two in cement, and number three in ready-mixed concrete.

In the significantly expanded HeidelbergCement Group, around 60,000 employees work at more than 3,000 production sites in around 60 countries on five continents.

HeidelbergCement is a leading brand on the Georgian cement market. The company supplies cement and concrete to almost every major construction project in Georgia. Moreover, HeidelbergCement is the only clinker producer in the country.

Azerbaijan Doubles Georgian Wine Import

BY THEA MORRISON

G

eorgia exported about 6.25 million bottles of wine to 24 countries in January 2019, which is a 22% increase compared to January 2018.

Azerbaijan alone imported 5,790 bottles of wine from Georgia in early 2019, which is a two-fold increase compared to January 2018, according to Azernews.

Azerbaijan ranks fourth among Georgia’s biggest trade partners after Turkey, Russia and China.

Georgian exports to Azerbaijan include cement, locomotives and other railway vehicles, mineral and chemical fertilizers, mineral waters, strong drinks, glass and glass wares and pharmaceuticals, among other things.

In addition, last month Georgia received $15.2 million from the sale of wine abroad – 33% increase year-on-year.

The top five countries that imported the most bottles of Georgian wine in January 2019 were: Russia – 4,602,218 bottles Ukraine – 553,164 bottles China – 281,229 bottles Poland – 268,724 bottles Kazakhstan – 156,120 bottles The Georgian National Wine Agency said that last month 96 companies exported wine from Georgia.

In addition, Georgia exported 2.2 million bottles of Georgian brandy (+109%) and 4,400 bottles of Chacha (+2%) abroad in 2018.

In total, Georgia has sold $23 million worth of alcoholic beverages in January 2019, including wine, brandy, chacha and others.

POLITICS

GEORGIA TODAY FEBRUARY 12 - 14, 2019

11

Russia’s Military Rearmament & the Consequences

BY EMIL AVDALIANI

L

ooking into the remaining years of the 2010s and into the 2020s, it is obvious that the decline of Russia in technologies/knowledge economy and general economy is set to be the dominant trend. One of the driving factors behind this development is exorbitant military spending.

In fact, the latter has been an unbreakable factor in Russian history, with numerous examples from the past where the same pattern was played out. This could lead to the argument that Russia’s “resurgence,” which appeared so robust in the 2000s, already contained many causes of the forthcoming decline, which is a complex phenomenon combining a range of factors from demography and infrastructure to corruption.

It was only in 2011 that the increase in petro-revenues reassured the Russian leadership of the availability of resources to build up the country’s military might, resulting in approval of the hugely expensive 2020 Armament Program.

This mega-investment coincided with the curtailing of many of Medvedev’s “modernization” initiatives and was criticized as too heavy by many economists.

This goes hand in hand with what numerous foreign and Russia-produced reports document as a significant decline in what Russia is able to produce scientifically and how this is used. This was even reported on by the Russians themselves at times when oil prices were high, leading many to believe that Russia was resurgent across the Eurasian landmass. In 2008, the Russian Academy of Science reported on Rus-

sia’s Scientific-Technical Development until 2030, noting that the country was losing its technology base as it increasingly becomes dependent on revenues from the sale of natural resources such as gas and oil. Another fundamental problem was inefficiency and high levels of corruption.

However, those problems at the time were not visible to many ordinary Russians, largely due to the focus on the Ukraine crisis, flare-ups in the confrontation with the West, oil prices dropping and more. The point here is that corruption, and even low scientific output, would still not be enough to result in troubles as long as there are viable incomes to the budget. Once this stops, all wounds open and what you get is the need for more pressure for greater accountability from Russian officialdom.

Ironically, what happens in Russia nowadays is almost identical to what happened in the country’s past. Russia’s history is in many ways a cyclic one. In the last years of the Soviet Union, by the late 1980s, the Soviets were fundamentally lagging behind the West in technologies and other important sectors of the state. Oil prices were low and there was high demand for a viable reform, despite the fact there was a distinct abundance of resources to move the country forward. Still, those financial and natural resources were spent on huge military apparatus and the development of deadly technologies.

The result, predictably, was the dissolution of the Soviet Union.

Going further back into Russian history, in the early 20th century, just before the outbreak of World War I, there was a clear demand within the government and the country’s elite for reforms in social and economic spheres of the

Image source: lowyinstitute.org

empire. However, this was also a period of militarization in Europe, with clear signs of the upcoming world conflict.

While politicians disagreed on the militarization, still Emperor Nicholas II chose to spend large amounts of money on quick and fundamental militarization. At a time when developments showed how backwards (in comparison with western European countries) Russia was economically and militarily, spending on the military would certainly spell a catastrophe for the government. This indeed happened in 1917, when the Russian Revolution broke out.

Similar comparisons might be found under other previous Russian leaders, with the cycle being almost identical: two groups are present within the government, where supporters of large

subsidies (hardliners) for military reforms usually gain the upper hand over the liberals.

Taking these comparisons, one might suggest, and quite correctly, that Russia has been experiencing a similar pattern in the past decade or so. While debating what is more crucial for the Russian state – social/economic reforms or large military spending – the government decided in the 2000s to initiate a quick military resurgence.

However, this “military overload” (or ‘voennaia nagruzka’ in Russian), just as in many previous cases enumerated above, serves in the modern Russian state as the “main source of structural deformation”. Moreover, all bureaucratic measures to speed up scientifictechnical progress turn out to be unproductive. Like previous periods of

Russian history, within the last decade there too was a struggle between hardliners and economic liberals. In this battle of visions of Russia’s future, unsurprisingly, the then-Finance Minister Aleksei Kudrin was dismissed in 2011 when he openly criticized the level of military spending.

One more point. Put into the above understanding of the Russian perpetual “military overload” problem the recent US pullout from the Intermediate-Range Nuclear Forces Treaty (INF Treaty). It will likely set a pace for the race in military technologies. In the Russian case, the US decision will further embolden the hardliners and weaken the liberals, which will probably result in Russia spending more money on military and thus enhancing the cyclic model we discussed.

President Visits Georgian Peacekeepers in Afghanistan

BY THEA MORRISON

P

resident of Georgia Salome Zurabishvili visited Georgian soldiers participating in the international peacekeeping mission in the Islamic Republic of Afghanistan. She looked round the military bases where the soldiers of the Georgian Defense Forces, taking part in the NATO Resolute Support Mission, are deployed.

Levan Izoria, Minister of Defense of Georgia, and Major General Vladimer Chachibaia, Chief of the Georgian Defense Forces, accompanied the President at the Bagram Air Base to explore the activities of the Georgian peacekeepers.

Zurabishvili had dinner with the Georgian soldiers and discussed the main developments with them.

She thanked the peacekeepers for their contribution to world security and stressed the importance of their efforts to Georgia.

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for our country’s ultimate unification.

Your participation in the NATO Resolute Support Mission contributes to global peace and stability. Also, it is a crucial step forward for our country’s security and stability. Your professionalism and commitment are recognized by all our partners; you are honored ambassadors of our country,” the President told them.

Zurabishvili also remembered those Georgian servicemen who had lost their lives while contributing to global security.

“They will stay forever in our memories. They have made a great contribution to our country's NATO integration and, most importantly, to our progress and full-fledged membership to the international community,” she added.

Within the framework of the visit to Afghanistan, the Georgian President also held key meetings with General Daniel Conley, Bagram Airfield Commander, General Austin Scott Miller, Commander of NATO's Resolute Support Mission and Mohammad Ashraf Ghani Ahmadzai, President of Afghanistan.

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